As another favor to oil and gas companies, MMS also set up an office called "Royalty in Kind," allowing drilling interests to pay the government not in cash but in petroleum products. The RIK office would then sell those products on the open market, bringing in some $4 billion a year. But since the office owned no pipelines or refineries, it was forced to extend lucrative contracts to the oil companies to transport and process the oil – taking another costly bite out of the revenue owed to taxpayers.
Instead of negotiating tough deals with the oil companies, officials in the royalties office indulged in what an internal investigation later termed "a culture of substance abuse and promiscuity." A third of RIK staff members, the investigation found, accepted illicit gifts from the industry. Others "used cocaine and marijuana, and had sexual relations with oil and gas company representatives." One pair of government-employees-gone-wild, celebrated among oilmen as the "MMS Chicks," partied hard during corporate snowboarding trips – one got so drunk at a ski resort that Shell had to put her up for the night in its "Dutchman Haus" chalet – and repeatedly had sex with representatives for Chevron and Shell. The "Chicks" did not recuse themselves from negotiations with the companies. Worse, they allowed Chevron and other firms to revise the terms of 118 contracts that had already been finalized – favors to the industry that cost taxpayers $4.4 million.
"They were literally and figuratively in bed with the oil industry," says Maxwell.
The director of the Royalty in Kind office, Greg Smith, was apparently too busy worrying about where his next line of coke was coming from to rein in his underlings. According to Interior's inspector general, Smith regularly bought cocaine from a subordinate, offering her a $250 "performance award" as a reward for provisioning him with quality "office supplies." When Smith wasn't high – or pressuring women on his staff for blow jobs, as the inspector general found he did repeatedly – he was busy accepting payments from an oil-services consulting firm in return for insider information about the RIK program.
When the inspector general sent his findings to the Justice Department, however, the Bush administration suddenly went soft on drugs, declining to prosecute Smith. It also failed to charge Lucy Dennet, a former associate director of MMS, whom the inspector general said "manipulated the contracting process" to steer $1.1 million in government business to a company run by two outgoing MMS agents, both of whom have pleaded guilty to felony violations of conflict of interest. Many Interior insiders believe that both Dennet and Smith are prime candidates for prosecution under Salazar. Speaking to Rolling Stone, the secretary refused to speculate about which former officials are now in legal jeopardy, but says that his investigation extends beyond the corruption at MMS to the entire department. "I am being cautious as a former prosecutor," he says. "I can't tell you everything I know."
Even by Washington standards, the level of corruption at MMS was mind-boggling – far worse than the notorious bribe-for-drilling scandal that defined the administration of Warren G. Harding. "The previous low point for the Interior Department was the Teapot Dome scandal of the 1920s," says Jeff Ruch, executive director of a federal watchdog group called Public Employees for Environmental Responsibility. "Right now we've got Teapot Dome cubed."
Danielle Brian, executive director of the Project on Government Oversight, goes even further. "Given the billions of dollars at stake and the number of people involved," she said, "this is easily the worst instance of government misconduct we have ever seen."
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